Stricter mortgage rules will be introduced in the UK in 2014, which will ensure that getting a mortgage to purchase a property in the UK will be more difficult than it has been in the bygone years. The underlying intention is to see people make a responsible mortgage choice and accept mortgage deals thoughtfully.
The new mortgage regulations, published by the Financial Services Authority (FSA) on Thursday, are designed mostly to thwart irresponsible lending. The FSA, which had conducted a Mortgage Market Review (MMR), has remarked that the new mortgage rules are meant to ensure that future borrowers don’t end up with a mortgage that they can’t afford.
Martin Wheatley, the MD of the FSA, has remarked that these new mortgage regulations would establish a more viable market that satiates lenders and borrowers. The MD said many lenders are now employing a more balanced set of criteria. But these commonsensical principles need to be entrenched in the system to safeguard the borrowers.
Martin Wheatley has assured the future borrowers that these new mortgage rules would eliminate the unviable lending practices of the past, which generated nervousness and difficulties for the borrowers.
The new mortgage guidelines have an ‘affordability test’ to ascertain whether the borrowers can meet the repayments of the mortgage they desire.
Wheatley has uttered that these new mortgage directives had been discussed thoroughly with consumers, parliamentarians, firms and other stakeholders. The directives are balanced and logical, voiced Wheatley.
Basically, as per the new mortgage directives, all borrowers will have to present to the lenders evidence of their net income. The borrowers will have to demonstrate to the lenders that they can afford the mortgage. Also, the borrowers will have to present a ‘plausible’ repayment strategy to the lenders.
‘Interest only’ mortgages can be offered to borrowers with a ‘credible repayment’ plan. Relying on increasing house costs will not be enough. All lenders will have to mull over the impact, which future interest rate hikes will have on mortgage repayment costs.